Welltower Inc. (WELL) Q4 2011 Earnings Report, Transcript and Summary

Jeffrey H. Miller - Executive Vice President of Operations and General Counsel George L. Chapman - Chairman, Chief Executive Officer, President, Member of Planning Committee, Member of Executive Committee and Member of Investment Committee Scott A. Estes - Chief Financial Officer and Executive Vice President Scott M. Brinker - Executive Vice President of Investments Stephanie Anderson - Chief Acquisitions Officer of Senior Housing John T. Thomas - Executive Vice President of Medical Facilities Charles J. Herman - Chief Investment Officer and Executive Vice President

Adam T. Feinstein - Barclays Capital, Research Division Bryan Sekino - Barclays Capital, Research Division Richard C. Anderson - BMO Capital Markets U.S. Jeff Theiler - Green Street Advisors, Inc., Research Division James Milam - Sandler O'Neill + Partners, L.P., Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Nicholas Yulico - Macquarie Research Karin A. Ford - KeyBanc Capital Markets Inc., Research Division Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division Molly McCartin - JP Morgan Chase & Co, Research Division Unknown Analyst Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division Todd Stender - Wells Fargo Securities, LLC, Research Division Robert M. Mains - Morgan Keegan & Company, Inc., Research Division

Good morning, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Health Care REIT Earnings Conference Call. My name is Brooke, and I'll be your operator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. Now I would like to turn the call over to Jeff Miller, Executive Vice President, Operations and General Counsel. Please go ahead, sir.

Thank you, Brooke. Good morning, everyone, and thank you for joining us today for Health Care REIT's Fourth Quarter 2011 Conference Call. If you did not receive a copy of the news release distributed this morning, you may access it via the company's website at hcreit.com. We are holding a live webcast of today's call, which may be accessed through the company's website as well. Certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Health Care REIT believes results projected in any forward-looking statements are based on reasonable assumptions, the company can give no assurance that its projected results will be attained. Factors and risks that could cause actual results to differ materially from those in the forward-looking statements are detailed in the news release and from time to time, in the company's filings with the SEC. I will now turn the call over to George Chapman, Chairman, CEO and President of Health Care REIT, for his opening remarks. George?

Thanks, Jeff. Let me begin by providing some perspective on the growth and transformation of our company. During the last 5 years, we have built a large S&P 500 company with great personnel and scalable processes. Our assets and enterprise value have more than tripled to $14.9 billion and $18.9 billion, respectively. The company has become a full-service health care, real estate organization dedicated to the continuing improvement of health care delivery. As we reflect on our company's accomplishments, I would like to highlight just a couple of items from 2011. First, last year we generated 1-year and 5-year cumulative total returns of 21% and 71%, respectively, both were best among our Health Care REIT peers. On the investment front, we completed a record level of $6 million -- $6 billion of investments including $1.2 billion of new investments in the fourth quarter. Clearly, our relationship investing program is working. At year end, 71% of our revenues were derived from private-pay sources. We'll move that number to the 80% level in the next year or so. Health Care REIT continues to differentiate itself from the market with its relationship investment strategy. Our long-standing immersion in healthcare is an inherent part of our ability to execute on this strategy. Because of this knowledge base, we are able to identify healthcare trends early and positioned and even reposition the portfolio for the future. Moreover, we are able to add substantial value to our operators and health systems. Our success in attracting the leading operators to our portfolio continued in 2011. We generated $5.2 billion in high-quality Senior Living investments. Significant additional investments were made with existing operators including Brandywine Senior Living, Merrill Gardens, Silverado Senior Living and Capital Senior Living. In the last half of the year, we also developed important new relationships with Chelsea Senior Living, Belmont Senior Living and Chartwell Senior Housing REIT. We're obviously very excited about our partnership with Chartwell, the premier and largest publicly traded operator of senior housing in Canada. This important new relationships establishes a best-in-class platform for Health Care REIT in Canada and extends our proven business model into the Canadian market. The high-quality portfolio is in attractive Metropolitan markets with favorable demographics and will be immediately accretive to FFO, with future NOI growth projected at 4% to 5%. And we expect to grow this partnership in the future with rights to first offer on acquisition and new development opportunities. In our medical facilities division, we made investments totaling $745 million last year in high-quality health system-affiliated medical facilities. At year end, our sector leading occupancy and retention rates exceeded 93% and 79%, respectively. We continued to increase the average size of our MOBs to 60,000 square feet and the percentage of MOBs affiliated with health systems to 87%. At year end, we owned and managed over 11 million square feet of MOBs. A touchstone of the long-term success of our relationship investment program is the strength and quality of our portfolio. We have sector-leading portfolio diversification with our top 10 operators constituting only 52% of our portfolio, and in the face of challenging economic times, our aggregate facility coverage was 1.9:1, demonstrating much greater resiliency for health care and senior housing facilities than for other real estate classes. We are enhancing our portfolio by capturing investments that reflect emerging industry trends in the evolving senior housing and healthcare environment and by culling properties from the portfolio that are not aligned with our strategy. In 2011, we disposed of $352 million of non-core assets. During the 5 years ended 12/31/11, we averaged $230 million of dispositions per year, and most of these dispositions were older, primarily, Medicaid-funded skilled nursing facilities, small unaffiliated MOBs and smaller portfolios. We have positioned our portfolio in high-end high-barrier-to-entry markets across the country. At year end, 40% of our portfolio was located in the Northeast and Mid-Atlantic areas. 76% of our portfolio and 91% of our RIDEA investments were located in the East and West Coast markets or the top 31 MSAs. Historically, facilities in these high-barrier-to-entry markets generally outperform other facilities. And these concentrations also give us the opportunity to foster collaboration among portfolio partners across the healthcare spectrum. Health Care REIT's growth, particularly during the last 2 years has been fueled by rapid growth and change within the Health Care market. We expect the growth and consolidation in health care to continue for several years. It is being driven by economies of scale, the clear need for professional management and training and the critical importance of technology to integrate clinical care, accounting and sales and marketing. These larger professionally managed and visible operators in the system should drive significant future investment opportunities for our company. So we emerge from 2011 as an industry leader, with a most unique and sustainable platform for future growth. This platform in our industry-leading portfolio will continue to drive strong organic and consistent reliable external growth. And before turning the presentation over to Scott Estes, I'd like to take a minute and congratulate Scott Brinker, who was recently promoted to Executive Vice President in Investments. And since 2001, Scott has played a key role in growing our portfolio from $1 billion to over $15 billion of real estate investments today, and we look forward to Scott continuing to play a central role in executing our strategic objectives. So congratulations, Scott. I will now turn to Scott Estes, our CFO, for a REIT financial and portfolio overview. Scott?

Thanks, George, and good morning, everybody. I apologize. I'm a little bit under the weather today. I have a little bit of a cold, so not quite 100%, but, I have a lot of exciting things to talk about today. As George discussed, 2011 was clearly a remarkable year, in which we transformed our portfolio, completing a record-breaking $6 billion of growth investments. Our portfolio continued to perform well in the fourth quarter, highlighted by blended same-store cash NOI growth of 4%. Our recent investment success and strong internal growth drove 21% FFO per share growth, and 18% FAD per share growth in the fourth quarter. Our relationship investment strategy continues to differentiate the company, having completed an additional $1.2 billion of high-quality investments in the fourth quarter and our recently announced expansion into Canada. At this point, our largest operators are performing well, and as George mentioned, we remain confident that we can generate both internal growth from our existing portfolio and external growth from our relationship investment program. Finally, our balance sheet remains strong, and we had ample liquidity with $1.6 billion of line capacity in cash on hand entering 2012. Turning to the details of the quarter. Regarding investment activity, we completed a significant $1.2 billion of growth investments during the fourth quarter, which, again, speaks to the consistency and sustainability of the HCN relationship-based approach to investing. The assets added during the fourth quarter were virtually all private-pay seniors housing and medical office buildings, nearly 75 of which are located in the top 31 MSAs, and are generally in the upper echelon of our portfolio in terms of asset quality. We believe these are outstanding additions to the portfolio and plan on making them available for property tours throughout the year. We profile many of our newest investments on our website and encourage you all to take a look as well. As detailed in the press release, we completed $178 million in seniors housing triple-net lease investments during the quarter. The most significant of these was the addition of 5 facilities to our existing Brandywine Senior Living partnership for $120 million at a 7% yield. These assets are a strong geographic fit with our existing portfolio and are all located in the New York and Philadelphia MSAs. In addition, we completed $627 million of investments in senior housing operating assets at a blended yield of 6.2%, which reflects the higher quality and growth potential of these investments. The largest of these investments was the $415 million addition to our Merrill Gardens partnership. These properties are located in excellent West Coast markets, including the San Diego, Santa Barbara, San Jose and Seattle MSAs. And we also assumed $224 million of debt associated with this portfolio at an attractive rate of 3.5%. With the portfolio expected to stabilize over the next 3 years, we expect it to generate NOI growth of 5% or better for 2014 and then 4% to 5%, longer term. And we also added 2 outstanding facilities to our operating portfolio through our new $185 million partnership with Belmont Village Senior Living. These facilities are only 2 years old, are in exceptional condition and are located in the premier submarkets of Los Angeles and San Diego. Consistent with our overall operating portfolio, we're confident that these properties will also generate long-term NOI growth of 4% to 5%. Also during the quarter, we completed the acquisition of 12 medical office buildings for a total of $263 million at a blended yield of 6.8%. The additions average nearly 78,000 square feet in size, are only 7 years old, they boast 94% occupancy and are 100% affiliated with major health systems. These are state-of-the-art outpatient facilities offering services such as outpatient surgery, radiology, oncology, hematology and neuroscience. As a result of these acquisitions, the overall percentage of our medical office portfolio of square footage affiliated with health systems has increased to 87% at year end. And finally, yesterday, we did announce our entry into Canada, through a $925 million transaction with Chartwell Seniors Housing REIT. Our aggregate investment of approximately $503 million will be funded through a combination of $244 million in new and assumed debt at a blended rate of 4.7% and approximately $259 million in cash. I would note that we put a hedge in place to effectively fix the purchase price to the anticipated second quarter closing date by locking in the exchange rate on the cash portion of the transaction. Now Chartwell is the largest seniors housing operator in Canada and will represent our 6th operating partner in the Health Care REIT portfolio. This portfolio consists of 42 facilities with approximately 8,200 units, with over half of the facilities located in the 5 largest Canadian markets and the majority of the remainder located in the top 35 Canadian census metropolitan areas. Importantly, the portfolio has the potential for expanding occupancy beyond the current rate of 88% over time. The year 1 NOI yield on our investment is expected to be approximately 7.4% after management fees. As a result, we expect the transaction to be immediately accretive to FFO and generate NOI growth of 4% to 5% over the longer term. We will not consolidate the 50-50 portion of this investment and we'll report the net income from these facilities on the income from unconsolidated entities line of our income statement. And again, as I mentioned, we do expect the transaction to close during the second quarter of 2012. I'm turning now to portfolio performance. Before I begin, I would point out a few changes to our supplement this quarter. We included Property Level Coverage after Management Fees on Page 2 of the supplement, and we also added some more detailed disclosure regarding our operating portfolio on Page 7, which includes the Summary at the bottom of the page detailing operator concentration within the operating portfolio, as well as Health Care REIT's ownership percentage. First, both our stable seniors housing and skilled nursing post-acute care portfolios continue to perform in line with expectations. In regards to our seniors housing triple-net lease portfolio, payment coverage stands at a solid 1.4x, while occupancy increased 50 basis points from the prior quarter to 88.2% on September 30, as reported in the supplement. Through the month of October and November, our stable seniors housing triple-net occupancy continued to strengthen and is tracking about 89% as of the end of November. This performance contributed to the strong 4.7% year-over-year same-store cash NOI growth within the seniors housing triple-net lease portfolio during the fourth quarter. Now I would provide a brief update on -- about our skilled nursing portfolio including some comments regarding Genesis. We continue to believe that skilled nursing facilities are the most efficient, cost-effective settings for providing many healthcare services, and we intend to focus our portfolio on a select number of key relationships with the strongest operators. Our most recent cash flow coverage is listed in the supplement for the trailing 12 months ended September 30 with a strong 2.2x. Our overall skilled nursing occupancy increased 20 basis points from the prior quarter to the current 88%, while same-store cash NOI increased 1.5% in the fourth quarter versus the prior year. I would note that same-store NOI would have increased by the more normal 2.5% to 3% this quarter but was going up against a tough comp of 4.9% growth in the fourth quarter of 2010, which included a significant catch-up of CPI-based revenues that quarter. Now I'd provide a brief perspective regarding how our operators are performing since the Medicare reimbursement changes went into effect on October 1 of 2011. Although significant, the Medicare daily rate impact through December and January was actually somewhat less than originally projected when considering the potential impact above the 11% Medicare rate reductions and the changes in reimbursement for therapy services. In terms of Genesis, we had a chance to catch up with George Hager and his team last week. They are performing slightly above expectations, with their Medicare daily rate coming in slightly above projections through January of this year, combined with the successful execution of cost mitigation efforts. Specifically to date, they've already put in place about $70 million of $80 million of annualized cost savings contemplated for 2012. Now looking ahead, Genesis remains focused on increasing occupancy and improving quality mix. They've actually developed a plan to expand the short-stay post-acute component of their portfolio to grow overall quality mix at a more accelerated rate than in recent years. As a result, we again remained confident in our view regarding Genesis's overall operating performance and their ability to pay our rent, as we expect the company's corporate level fixed charge coverage to be at approximately 1.4x in calendar 2012. At this point, I'll provide an update on our seniors housing operating portfolio, which is comprised of our RIDEA's partnerships. The blended occupancy across our private operating portfolios at year end increased 70 basis points versus the prior quarter to 87.3%. In addition, same-store operating portfolio cash NOI for the quarter increased 7.7% versus the comparable quarter last year, driven by a combination of 30 basis point occupancy increase, a 5% revenue per occupied unit growth and a slight expansion in margins. Our operating portfolio continues to perform in line with expectations, and we remain comfortable with our NOI growth expectation of 4% to 5% over the long term. Now moving to the medical facilities portfolio. Our MOB portfolio performed well in the quarter, with same-store occupancy increasing 20 basis points sequentially to 93.6%, while same-store cash NOI grew 0.4% for the quarter and 1.9% for the year. For 2012, we expect our overall MOB portfolio occupancy to improve slightly to the 94% range, a tenant retention rate of approximately 80%. And note that only 6% of leases are expiring this year. In regards to our hospital portfolio. Cashable payment coverage remained strong at 2.5x. We again experienced solid 3.5% same-store cash NOI growth in our hospital portfolio during the fourth quarter versus last year. Our Life Science portfolio also performed well in the quarter generating strong same-store cash NOI growth of 7.8% and the portfolio remains full at 100% occupancy. Turning now to financial results. We did report normalized fourth quarter FFO per share of $0.91, an increase of 21% versus last year's quarter and normalized FAD per share of $0.80 up 18% versus the comparable quarter last year. Our quarterly performance is driven by the internal growth generated by our existing portfolio combined with our success investing profitably throughout the year. We recently declared the 163rd consecutive quarterly cash dividend for the quarter ended December 31 of $0.74 per share, representing a 7% increase over the same period last year. In terms of fourth quarter capital activity. We successfully raised $630 million of equity in November, which funded a portion of our fourth quarter acquisition activity. We also issued 665,000 shares under our dividend reinvestment program, generating over $32 million in proceeds and issued 106,000 shares through our at-the-market program generating an additional $5 million in proceeds. At the end of 2011, we had $1.4 billion available on our $2 billion line of credit, and had additional $163 million of cash and cash equivalents, providing $1.6 billion in liquidity as we enter 2012. At the end of December, our debt to undepreciated book capitalization stood at 46.1%, a decline of 50 basis points versus the prior quarter. Our secured debt to total assets was 14.2%. Our trailing 12-month interest and fixed charge coverage remains solid at 3.0x and 2.4x, respectively. Our net debt to EBITDA -- excuse me, net debt to adjusted EBITDA as reported in our supplement was 6.9x but I think more importantly, including the full annualized EBITDA from our fourth quarter investments and then backing out transaction cost impairments, loan loss and gains, it was about 6.2x. Over the longer term, we continue to expect to drive debt to undepreciated book capitalization towards the 40% level and net debt to EBITDA at 6x or below. Finally, I'll review just briefly our 2012 guidance and assumptions that are contained in our earnings release. As a reminder, our guidance for 2012 does not include the impact of any additional investments other than our existing development pipeline in the Chartwell investment. We expect to report 2012 FFO in a range of $3.68 to $3.78 per diluted share, representing strong 8% to 11% growth. Our 2012 FAD expectation is a range of $3.26 to $3.36 per diluted share, which also represents a strong 9% to 12% increase over normalized 2011 results. In terms of investments, our 2012 guidance includes our $503 million Canadian investment expected to close in the second quarter and $248 million of funded development throughout the year for projects currently under construction. We expect approximately $200 million of dispositions at an average 11% yield consisting primarily of skilled nursing assets that don't match our focus on post-acute care. Now finally, we're projecting development conversions for projects currently under construction of approximately $355 million at an average cash yield of 8.6%. As we have explained in the past, we believe our current portfolio mix is an excellent balance of higher growth opportunity through our operating portfolio supported by the more stable long-term rate increases expected out of our triple-net lease portfolio and medical office buildings. As a result, we're currently forecasting same-store cash NOI growth of approximately 3% in 2012. And last, our G&A forecast is approximately $91 million this year, which includes approximately $5 million of accelerated expensing of stock-based compensation, which will hit the first quarter. These changes, in part, reflect our continuing addition and retention of outstanding professionals who have helped us successfully manage the significant growth within our portfolio. Operator, with that, that concludes my prepared remarks, and we'd like to open the call for questions.

[Operator Instructions] Your first question comes from Adam Feinstein with Barclays Capital.

I'm here with Bryan here also. So maybe just as a starting point, I just wanted to ask more about Genesis, it sounds like things are going well there, you talked about the cost mitigation strategy, so it was, I guess, almost a year ago when you guys announced the deal, so maybe just talk about how things have gone relative to the initial thoughts and just about future development opportunities in terms of funding more assets where you can partner?

Yes, Adam, we've had a great relationship with George and his team. It's a terrific, seasoned team that really is doing a great job in the face of these reimbursement cuts. If anything, we've accelerated some of the post-acute -- short-stay, post-acute facilities. We've been working with George and his team, we're having meetings with the assisted living operators, so there can be discharges, but -- through them and also going both ways, that is, and then also to various hospital systems. And to make sure that there are going to be excellent discharges, excellent relationships between the hospitals, the high-end hospitals and Genesis so that the post-acute facilities will really perform well. So I think all the other, except for an obvious reimbursement issue to deal with, it’s been, if anything, even better than anticipated. Is there anything else, Scott, that you want to add to that?

No. I think that's a good overview. Yes, Adam, we really are impressed with their focus on managing the business and managing their team. As it relates to some of the cost mitigation efforts, they really have been very focused and I think that's why they're so successful in achieving a lot of the potential cost savings for the year. Maybe, just to provide a little bit more color on that, they really looked at internally weighted benefits, that these incentives was a significant component of it. Overhead expenses, they've looked at. One thing that's interesting, they looked at their center level, individual facility level, spending by facility and actually ranked all their buildings to really assess any outliers and require them to reduce costs a bit, which are already in place, which has helped and some of the professionals’ and vendors’ savings that you'd expect them to be able to get. And actually, the only thing that's still pending, I think, as we move throughout the year, is a bit of the, I would call, the therapist productivity. A lot of the efforts they have to more efficiently build by giving their therapists at the bedside iPads to do realtime billing and that's going well, but I think the cost savings of that will be realized throughout the year.

Guys, it's Bryan, just a quick one for me. I know in the past you've talked about $1.5 billion of acquisitions in your informal guidance. And it looks like you pretty much did that in the back half of '11. So you’ve got some new relationships here, so I wanted to see if you could just give us an update on -- informally, what you can do with your existing relationships and what you're seeing in your pipeline?

Well, clearly, you're identifying a success story, Bryan. In the fourth quarter, when we already were adding on assets in the Merrill Gardens and the Brandywine and Silverado portfolios, it's showing that as we add each different operator, new operator, it's just adding to the opportunity to do a large cumulative amount of investments each year. But I think we're going to stick with him. They're going to have to do right now because we think that while there may be some ongoing consolidation in the next year, or maybe, in the next 2 years, that, that's more of a steady-state kind of number that we think is a fair one, once we reach that time when things are a little slower and there's been more consolidation and growth.

Your next question comes from Rich Anderson with BMO Capital Markets.

So quickly on the deals with Brandywine and then there’s the operating acquisition. It seems counterintuitive to me that you would have a 7% return on the triple-net and a lower return on the operating. I figured, you'd be compensated with the risk that you're taking on. Can you comment on why those 2 numbers are kind of reversed?

Sure. It's Scott, I'll try to take that. I think as it relates to the -- specifically, the 6.2% yield on the RIDEA deals. If you think about it, in my opinion, it really comes down to the quality of those assets first of all, you're in outstanding locations in West Coast markets. And the biggest component of those investments this quarter is the Merrill Gardens, which is actually not yet stabilized, which as I noted, will have higher growth than 5%, we think through 2014. So when you’re trying to take the aggregate picture in terms of growth, prospects and looking at these actual assets in the premier markets, generally, the West Coast plots better growth potential. I think you paint a pretty good risk-adjusted return picture.

Yes. But Brandywine or East Coast are -- should be good locations as well, no?

Yes. I think you probably risk -- think about the 7% starting yield, but think about the increases too, 2.5% on a triple net versus the 4% to 5% longer-term growth potential, if not a little bit better near term. And I’d also even point out too, we had some attractively priced debt on the Merrill Gardens portfolio, the $224 million at only 3.5% should probably be considered as well.

Okay. And then going to the Canadian deal, you mentioned -- or it was mentioned, the 88%, and there’s upside, that doesn't sound like a lot of upside to me. And maybe there's -- maybe there's a little bit more to get. But where do you think the main occupancy opportunity is within that overall portfolio? Is there specific clusters of where you can see greater upside than other areas that you're buying there?

Rich, I'll just make a general comment, and then I'll have Scott Brinker add some color to it. But we have not only occupancy upside, but we have some staffing costs and other ways that we can improve everybody's return. We think that Chartwell is really a fine operator. They operate very much like we want our -- like our top operators do in the United States. We also -- I think we might have some ability to add ideas and to do the collaboration, look at everything that can be approved in this new portfolio. Scott Brinker?

Yes, Rich, this is Scott. There are, I’d say, 3 or 4 fill-up buildings that are sort of less than 2 or 3 years old that still have census in the 70% to 80% range that we think over the next 3 years will improve to the 90-plus percent range. The other point that I would make is that in Canada a number of these markets had some overbuilding over the last 5 years that's starting to burn its way through. So industry wide, in Canada, the census is down 300 or 400 basis points from 3 or 4 years ago. And we're finally starting to see that sort of move back in the correct direction. So at least long-term, we think sort of low 90s -- 91%, 92% is highly achievable, that's what Chartwell had done historically. And this portfolio, the 88%, we think there really is some 400 basis points of growth over the next 3 or 4 years.

But were -- are there any geographical areas, though, like specifically where it’s lower than others like, say, Ontario or someplace specifically within the portfolio?

Yes. It is market specific, but if I had to make a general comment, I would say Ontario suffered more than Québec.

Okay. Why don't -- why didn't Chartwell want the 3 properties you're going to own yourself?

Yes. It's a good question. This is Scott again. It really comes down to the importance of immediate accretion to them. These are 3 very high-quality purpose-built fairly new buildings that haven't yet filled. They have occupancy around 70%. So when you look at the purchase price versus the NOI that's there today, at least for Chartwell, the immediate accretion wasn't there, that they needed. We like the growth profile in those assets and we think that our purchase price over time is more than reasonable and we're happy to own them.

Okay. And then the last question on management fees that you're paying them. Does it work out, if I'm doing my math right, assuming costs are sort of like a maybe 40% operating margin to get to a revenue number maybe in the $9 million annual range or management fees that you're paying to them, is that about right?

That's roughly correct.

Your next question comes from Jeff Theiler with Green Street Advisors.

A lot to talk about today, I guess I'll focus on Canada. Can you talk a little about what really drove your decision to go into Canada and why you thought now is the right time to do it?

Let me start and then I'll turn it back to Stephanie Anderson and to Scott Brinker again. But frankly, Jeff, I wanted to emphasize that we think this is a natural extension of our relationship-driven strategy. These guys are terrific. Brent and his team operate facilities, provide the kind of care we like to see provided. And it's a very comfortable relationship between the 2 companies. So we can add value to one another. So we view it, first of all, as less of a huge international investment leap and more of an extension of our relationship strategy. Scott or Stephanie, you want to start?

Yes. We have spent some time over the last year or so looking at different marketplaces and Canada we thought was unique in the sense that their growth of the elderly population as a percent even exceeds the U.S. There's also -- they've had less of a hit to their economy by the housing there. So even though there was some overbuilding, specifically in the seniors housing market, it did not impact their economy and so the stability of that economy was an advantage. We also are very lucky to have the top operator as our partner there. We think that the growth in -- to grow with them in that market will be extremely successful and so all of those things really are what drove us to Canada.

Okay. I guess one kind of following up on that. So when you think about the differences of senior housing in Canada versus the U.S., what are the key differences or things that you’ve got to focus on?

It's a very similar marketplace to the U.S. That was one of the things that also attracted us to that market. It's understandable, it's mainly -- it's lower acuity. These are really independent living facilities. The difference in Canada is that they have specialized health care once you reach a certain age and acuity level. So that causes there to be less acuity in this portfolio. There's also been some changes on the regulatory side in Canada that happened this last year, where they're starting to have more licensing requirements, as well as they've moved the acuity levels up to be able to move into the socialized housing. So therefore, that creates additional private pay opportunities, which, over the next 5, 10 years, we think will be an advantage.

Scott Brinker, anything to add?

Yes, Jeff, I would just mention that it's all private pay and the buildings are comparable to what you would see in the U.S. If anything, they're a little bit bigger, but they have en suite bathrooms, all the amenities that you would want and expect in the high-end U.S. senior housing market. So we think that we'll do some site visits and people will be very excited about the quality of the real estate that they see in addition to the operating partner.

And then -- I guess flipping this around and looking at it from Chartwell's perspective. It seems like a good acquisition. Why did they want -- or need you to come in and partner with them?

Yes, this is Scott on it, Jeff. Better for them to answer that question, but our best guess is that it's a huge portfolio. This is a meaningful increase in the size of their company. They raised some capital last night to help them pay for it and I'm not sure that they could have raised as much as they needed to, to fund it 100%. We've been talking to Brent and his team over the last year about any number of opportunities and decided that we had a common approach to doing business and there were mutually beneficial opportunities on both sides of the border for us to work together.

Right. Fair enough. One last quick question. In Chartwell's disclosure, they have this NOI guaranty reserve. Is that -- are you just ignoring that reserve or how are you accounting for that?

Yes. That's correct, Jeff. That is not included in the $925 million purchase price and similarly, we did not take any credit for that in the NOI or cap rate expectation that we've provided.

Your next question comes from James Milam with Sandler O'Neill. James Milam - Sandler O'Neill + Partners, L.P., Research Division: A question on the Chartwell portfolio. It looks like it's majority IL. Is that the correct way to think about it or is it a more service-oriented product? And then also, is there -- do you guys have any identified plans to either adjust the unit mix there or make them more assisted-living type of units?

Yes, this is Scott again. It is independent living, but all of these buildings have the ability to provide services. So there's no nursing care happening. This is all private pay but certainly activities of daily living is something that can be provided, but if you were to walk through the facilities, they’re very low acuity. Chartwell, over time, may decide that the best approach in this specific building is to add more health care services, they have that ability and capability. But today, it's a very low acuity portfolio. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then is there anything you guys can tell us about Chartwell's U.S. portfolio that they're working on divesting?

No. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Okay. A quick one, just -- Scott, maybe you could just take us through kind of sources and uses on the balance sheet, just given where the line of credit balance is and obviously, you have some capital needs to close this Chartwell. Are you guys thinking unsecured debt? Maybe you could tell us where you think a current 10-year would price and thoughts on, maybe, equity as well?

Sure. I think we're actually -- we have a lot of flexibility entering 2012. We had, as I mentioned, only $610 million borrowed on the line, essentially at year end. And we actually had $163 million of cash with some dispositions that occurred right at the end of the fourth quarter helping the cash totals there. So the Chartwell transaction is not expected to close until the second quarter. And our cash requirement, really, for that is only about $250 million. So we're -- we actually have good flexibility from a capital perspective, but I do think we're -- as always, we're watching the debt market, the equity markets, pricing on it, 10-year for us today, I think is probably in about the 4.5% area; 7 years, probably, in about the 4% area. But again, I think with the -- most importantly, we have some good flexibility and have a lot of time to think about what we will need to do. James Milam - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then just my last one. On the G&A, that looked like a higher number than I was expecting. Can you just talk about the acceleration of the amortization for the stock-based compensation. Is that unique to this year? And then is the rest of the increase -- is that due to an increase in staff or is it just that people have been working hard and deserve more compensation for the service they provide in the company?

I think, first -- just overall, James is referring to our G&A, which, in 2011 was about $77 million projected to increase about 18% to $91 million in 2012. The overall G&A, James, first, if you’re thinking about that, I actually think we're doing a good job trying to staff efficiently. We've really added some outstanding people and do need to retain them, but if you think about that, traditionally, the company is probably running about 50 to 60 basis points of G&A as a percentage of assets. And we just added $5.6 billion of net assets, but that G&A increase of $14 million is actually only a 25 basis point increase in G&A. So I think we're still actually staffing, as reasonably as we can. And I can see that George is very focused on controlling costs and we're all thinking a lot about that. As it relates to the $5 million, that has been in the first quarter numbers, probably, the last 4 or 5 years and basically, people, if they've had enough years of service with the company or are directors of the company, you expense the annual grants in the first quarter immediately.

Your next question comes from Derek Bower with UBS.

Ross Nussbaum, here with Derek. A couple of questions. The 7.7% same-store NOI growth for the senior housing operating portfolio, can you break out -- how much of the top line revenue growth was driven by increased occupancy versus a higher rate?

Ross, this is Scott. The number there is about 30 basis points of occupancy improvement and I believe, it was up 4.6%, which I called 5% in my prepared remarks, so a little less than 5% revenue per occupied unit increase. And margins, as a result -- if you can see in the same-store calculation, I think are up about 70 basis points.

Where did that come in relative to your expectations when you bought these assets?

In my view it’s pretty good. We've always said 5% -- over 5% near term and I think the 3 or so quarters we've generated same-store cash NOI returns on the operating portfolio and, you guys can all look and don’t hold me to that either, I believe it was about 12% and about 2 quarters at 8% growth. So again, near term, I think we'd see some better growth. There’s a few of the assets in the portfolio as we've acquired [indiscernible] and we should continue to see some of those benefits over the near term. But again, long term, we still like where these operators are and think they’re the type of operators that we're comfortable believing can generate long-term NOI growth of 4% to 5%.

Great. And I was actually a little pleasantly surprised on that rate number because I thought that the upside near term was going to be occupancy driven as some of the leased-up facilities were improving and that rate improvement is pretty meaningfully above what Nick has been reporting lately. What do you think is driving that in your facility?

I think, Ross, that it sort of confirms our premise that some of these high-end markets have a lot of pricing power, and are very strong facilities. So we're really pleased with that number as well.

Okay. Let me switch over to MOBs. On the $263 million of MOBs you purchased during the quarter, where are the in-place rents relative to market, in your view?

John Thomas?

Yes, the -- Mike Noto’s team were working hard market-by-market to get the best rates possible. Again, our increase in occupancy -- or our increase in the percentage we're building to affiliate with healthcare systems, again, we get stronger rates and stronger renewals because of that. So that's again, we continue to focus on that. That's where we're getting better rates to market, based on that concentration.

Have you -- just to be clear, if you look at the actual in place rental rate per square foot today, you think that's at or below market?

At or above. I'm sorry, you said on the acquisitions?

Yes, on the acquisitions. Are you -- where are those rates relative to the current market rents?

Yes. I apologize. They're at or below -- we did find some very attractive high-quality assets in the fourth quarter with rates either at or below, that was very attractive. Increase was built into those leases.

Okay. And from a location perspective, it looks like, from your website, I was trying to dig this up, are most of these in Atlanta and Central Texas?

Atlanta and Central Texas. Dallas -- North Dallas in the Southlake area; Houston -- excuse me, Atlanta and then Central Texas.

Okay. Let me go back to the Chartwell transaction. How did you structure -- or have you structured it to avoid any taxes -- cross-border taxes on that investment?

Scott Brinker?

Yes, I don't think it's necessary probably to go into the details, but one thing that we liked about the Canadian market, in addition to its proximity, is the fact that the tax burden is very low. So most of the taxation is actually upon the exit from the investment, which may or may not ever happen. So the taxes during the holding period are very low and therefore, attractive to us. So it won't meaningfully reduce our yields.

So as you bring those profits back on an annual basis into the U.S., you're not expecting any federal taxes?

There is a tax. It's just very low.

Okay, understood. Last question for me. The dispositions that you have in guidance looks like the cap rate there is high. What kind of assets are you disposing of at 11% cap rates?

Ross, we've been really looking at Medicaid-oriented SNFs and a number of those have been in our portfolio for a long time and they have high yields. And that's just a choice we're making to gradually dispose of assets that perhaps won't be as closely aligned with our strategy in the future.

Your next question comes from Nicholas Yulico with Macquarie.

Going back to Chartwell. Can you just talk a little bit more about this idea that socialized medicine in Canada, most elderly people actually are going into long-term care rather than assisted living since -- when you're looking at the portfolio, there are -- I mean based on the Chartwell press release, there are a number of facilities particularly in Québec that do offer some level of assisted living on Alzheimer's?

Yes, right. There is -- in Canada, there is an acuity test for when you will go into a government-sponsored -- they call it a nursing -- they call it long-term-care homes. It is not the same as our nursing homes in the U.S -- if you went to visit one, they are much lower acuity. If you went back 10 years ago in the U.S. when the hospitals did not have DRGs and there were -- the elderly ended up staying longer time periods in the hospital. So that is more similar to where the Canadian health care market is today. So you have their government supported with long-term-care home, which is more like a -- it's more like assisted living in the U.S. today. But you do have that gap where you have someone that is not going to live at home, may need some supportive services that they do not qualify for the long-term care homes. And that is a gap that -- the gap in acuity is expanding and we do believe there's a lot of opportunity there to provide those services. And yes, definitely, with Alzheimer's and things like that, it's a lower acuity Alzheimer's than what you would see in the U.S. but...

That's helpful. And then along those lines, I mean, are all these facilities set up so that residents who do need to use, who get older and need more intensive healthcare services, that they can bring in an outside agency to do that at the facilities?

They don't really have the same -- definitely they have the ability to offer those additional services already. It would not necessarily have to be an outside agency. Chartwell as an operator -- is an operator in Canada and they operate along the continuum in Canada. So we can add nurses to the building if necessary. We can add caregivers. It's just a little bit less regulated market plays right there today. So there is a lot of flexibility in the way that we work with the portfolio to provide additional services.

Okay. And then just one thing on Chartwell. It looks like the average age of all the buildings is 13 years old and there's some -- obviously, some of the older ones in some of the cities in Québec, but are you guys looking at any of these facilities as needing redevelopment to maybe enhance returns on the facilities?

Yes, this is Scott. I mean, there are a few facilities that don't perfectly fit our profile and we’ll evaluate whether the right approach is to add services, renovate or sell, but that's a small number out of the 42. Most of these are very high quality in markets that perfectly fit our profile.

Okay. And just quickly, last thing, on Merrill Gardens. Are the new acquisitions -- do they have a similar unit mix as your old relationship, which I think was 66% IL?

Scott Brinker?

Yes. They're similar. They're a little bit more weighted towards independent living and they are a little bit bigger. One thing that Merrill does is try to fill the facility with independent residents that then might add services over time. So a newer building would tend to have a much lower acuity resident than one that’s been in existence and managed by Merrill for a number of years.

Your next question comes from Karin Ford with KeyBanc Capital Markets.

I wanted to ask about the 3% NOI growth guidance for the same-store pool for 2012. How much of your NOI is in the same-store pool in 2012 and what are the growth prospects for the non-same-store pool relative to that 3%?

It’s Scott Estes. I think it was about 60% this quarter, a little bit less. And the big reason was some of the significant level of acquisitions we completed during 2011. And when you really look at that, you will feel the Genesis is probably the most significant signature [ph] in there over time. So the bottom line is the expectation of 3% really comes from the triple-net seniors housing hospitals. And skilled nursing are basically 2.5% to 3% growth. You have some higher growth projected out of the RIDEA portfolio, as well as the Life Science at 5%. And the medical office portfolio, we're roughly projecting flat to up a percent same-store NOI. We do have a small amount of leases expiring in the MOB portfolio. It's slightly lower yields that's impacting that number. But all in all, 3% is a reasonable expectation.

And it sounds like the non-same-store pool would be higher than 3%? Generally?

Yes.

Okay. Same question, just relates to -- going back to the sources and uses question. What type of sources and uses are assumed in guidance? Do you assume that the $600 million out on the line in the Chartwell deal are financed just on the line or do you have any permanent financing assumed?

No. We do not include any permanent financing in those numbers, nor did we include any investments, as I said, beyond what's in there. The biggest variability in the range that we provide is the dispositions. Basically, if you take $200 million at 11% at the beginning or the end of the year, it gets you -- you're about $0.10 flexibility in the guidance number.

Okay. And last question is -- just going back to the relative cap rate discussion. Can you just talk about what you attribute the differential and cap rates you paid between the 7.4% for Chartwell versus the 6.2% for the $627 million operating senior housing in 4Q given, I think you're expecting similar NOI growth in the 2 portfolios over the next few years?

Do you want to comment, Scott?

Yes, this is Scott Brinker. The NOI growth on the U.S. assets is higher than in Canada. They're both well in excess of the triple-net lease escalators that we're accustomed to, but there is a meaningful difference over the next 3 years at least, especially in the Merrill Gardens portfolio, with respect to NOI growth.

Okay. Meaningful -- you're sort of talking about that 4% to 5% range that you quoted for both, so you think Chartwell is closer to 4% and the U.S. assets are closer to 5% or...

Yes, let me clarify. The 4% to 5% is upon stabilization and I would say that the growth profile in the 2 portfolios are similar once they're stabilized. Over the next 3 years the fill-up, and therefore, NOI growth in Merrill Gardens is much higher.

Your next question comes from Tayo Okusanya with Jefferies. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Just a follow-up question on Merrill Gardens. Could you just tell us where the occupancy is right now, so we can get a sense of just what kind of occupancy gains you could get over the next 3 years?

Yes. This is Scott, again. There are 6 buildings of the 9 that are above 90%. There is one building in San Diego that just opened recently, so that is driving down the portfolio average. And then there are 2 in California that are below 90%, closer to 85%, that we would expect to stabilize in the low 90s over the next year or 2. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Okay. And the one recently opened building is -- where’s the occupancy there now?

Well, it opened in the fourth quarter, so [indiscernible] 0, it's close to it. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Okay, got it, that's helpful. And then just in regards to the senior housing operating portfolio, I mean, you guys have been on a tear the past 18 months really building this platform out. Could you give a sense now with all these new deals, fourth quarter and as well as Chartwell, how large the senior housing operating portfolio is as a percentage of NOI and basically, how large can it get and if you start to run up against any REIT rules that may limit further growth in this platform?

Let me just try to look at this more generically. I mean, one, probably there are fewer pools out there of large senior housing and portfolios. But we seem to continue to find them and our operators tend to find them. I don't know any reason why we would be running into any kind of REIT rules in terms of growing our senior housing portfolio. Right now, we're $5.2 billion out of our $6 billion last year, Tayo, were senior housing assets and we're already starting out this year pretty well. But I look out another year or 2, and maybe we get to more of a steady state in terms of what we can do, but we continue to be a bit surprised at the opportunities. Chuck Herman, do you want to -- Head of Senior Housing, do you want to comment at all, generally, about the markets?

I mean, generally, the market -- we have -- as George stated, we're feeling pretty good about those prospects, especially with the quality of the operators that we've got in place. These guys tend to find a lot of off-market transactions, which gives us a more stable growth profile over time. We also are seeing a fair number of portfolios, as George stated as well, so we feel pretty strong about the market right now. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Okay. So on a pro forma basis, the operating portfolio, as a percentage of your total NOI is what now?

Tayo, pro forma for the deals announced in the fourth quarter plus the Chartwell deal is about 17.5%. So the NOI, that's about what we've talked about -- we've talked in general and as we evaluate our longer-term strategy, I mean, 20% range is a nice balance we think of having operating asset exposure. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Okay, that's helpful. And then just one last question, just kind of given where cap rate seems to be going directionally, is there any interest at this point of ramping up development again or is it still too early to get involved in that?

We've talked about being careful about development, but in the -- let me get into the acute care space too, it's -- clearly, there is more profound change occurring in the medical facilities, health system area and we have found some awfully good pre-leased top and large MOBs to do with great systems. And we will do a certain amount of that. We tend to limit those developments to around $300 million in a year when we go into our planning with John and his team. And then on senior housing, there has been surprisingly little development and we would do some development of high-end facilities with our existing operators, with whom we have master leases and a great deal of confidence. So there is some room for development, but again, we're looking at $200 million to $300 million on each category is sort of our cap.

And then if I could add, George, it may have been a little bit lost in the shuffle, but we did start $150 million of development projects this quarter, at a blended yield projection of about 9%. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Yes. That's particularly why I asked the question. I noticed that and I was wondering what was going on there.

Yes. I think that's right. I mean, for us to add potentially starts of $300 million to $500 million a year would be just a nice supplement to an acquisition program that's been very active. And as George mentioned, the 2 MOBs we started this quarter, are 100% pre-leased and everyone else is an existing operator, generally, with the combination of seniors housing facility. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Okay, that's helpful. And then Scott, when the deal -- the Chartwell deal is closed, just wondering, I know you guys are not going to be consolidating that but, will you be giving us operating statistics associated with it going forward?

Yes. We're still evaluating that Tayo, as we think about it, obviously, everyone will want to understand the performance of that portfolio and we will give as much as we can. Yes, I still think we are just talking about it internally and haven't finalized it, but we'll make sure people can understand how they and the overall RIDEA portfolio are performing.

Your next question comes from Michael Mueller with JPMorgan. Molly McCartin - JP Morgan Chase & Co, Research Division: Actually, this is Molly McCartin for Mike. So I have a couple of questions. First, sorry if I missed this, but what drove the strong 4.7% senior triple-net NOI growth in 4Q, higher than the secured and active 3% outlook?

We actually didn't mention that. You didn't miss it. We’re again benefiting in 2011 from the stronger-than-expected bumps we put there on our entrance fee portfolio this year. That's driving the a little bit more than you'd expect to more normal 2.5% to 3% growth there. But we increased rents and our entrance fee portfolio at a greater rate during 2011. Molly McCartin - JP Morgan Chase & Co, Research Division: Okay, great. And then, also, did you mention what the full year 2011 same-store NOI growth was?

No, we didn't. We actually could do that, we -- you could just calculate it probably from the 4 quarters that we've reported, but we did not do that and I don't have that right in front of me. But I do recall that most of the quarters this year have been what guides between 3% and 4%, so my guess is it'd be somewhere in that range, if not even a little bit better. It’s generally towards the 4% range. Molly McCartin - JP Morgan Chase & Co, Research Division: Okay, great. And lastly, what's kind of happening with the average time to stabilize the development right now and what is the trend going forward?

What we're following -- on the senior housing side, yes, it really depends on the size of the asset and the pre-leasing, generally, the ones -- the newer ones that we're doing tend to have pretty strong pre-leasing in the seniors space. A lot of John's stuff in the medical office building, they are 100% pre-leased the day the doors get opened. So I would say, it depends on size on the seniors side and the amount of pre-leasing, 12 to 18 months is pretty typical in our space.

But they're on target.

Yes, they’re on target. On the medical side, we don't start development projects unless they're 75% pre-leased and we're hitting close to full occupancy, if not 100%, before they're opened or complete leasing before they're opened. Molly McCartin - JP Morgan Chase & Co, Research Division: Okay. And do you see kind of it going in the right direction? Is the time getting shorter or have they kind of been flat?

No, I think people -- several of our operators have done extremely well. So it's case-by-case basis, but generally, we feel pretty strong about the market right now.

Well, I think we see a little development check. These are filling very quickly. It’s not like years ago -- 10 or 15 years ago, when a lot of development was going on and it was really a tough slog and they're doing all -- all doing very well.

Your next question comes from Uireil Gioti [ph] with Morgan Stanley.

I was wondering, could you provide an estimate on the current margins on the master portfolio and where do you expect them to go?

Yes, just to clarify the question, you asked the current margins and where you...

Yes. On your master portfolio, your Canadian acquisition.

Yes. This is Scott. So the current margins are in the low to mid-30s and we would expect to stabilize the margin in mid- to high-30s.

Okay. Got it. And does the future rights agreement that you signed with Chartwell, does that include their U.S. portfolio?

It does not. This is Scott, again. It is within defined boundaries of the joint venture assets that we acquired in this portfolio.

Okay. And given that you guys went north of the border, would you consider going to other regions internationally, perhaps Europe?

Well, you should note that back in late 1990s, was it? We were over in England with -- the U.K. with Dan Beatty [ph], Bill Carlson [ph] and another -- and we had a local partner, Pat Carter [ph], who ran the fourth largest skilled nursing facility public company in that country. So if we have the right opportunities, we would look hard at it, but I will tell you that, one has to really look hard at the opportunity cost, the time commitment and we would only go in if we had really excellent opportunities with local partners like we did years ago in Great Britain, and as we are doing now with Brent and his team up in Canada.

Got it. And going back to the Canadian -- I mean, Canada, as a acquisition region, would you be willing to go higher on the acuity spectrum? You mentioned earlier that perhaps Chartwell will add perhaps a memory care unit on the independent living asset that you already own in the JV, but would you be interested in, like, focusing on post-acute, for example, or going to other asset classes, within Canada?

We're really focusing on driving our private-pay percentage up to 80%, in part, so we don't have to talk about reimbursement, I suppose. And so -- and we're not eager to do that right now in Canada, I think this is a great first step to learn more, to be with the top senior housing operator in Canada. And then we'll have years to evaluate what, if any, additional moves we make in any country.

Got it. And talking about the RIDEA portfolio, the same-store NOI, at 7.7%, it was 8.2% last quarter. At what point do you think that the current portfolio will go to a more stabilized 4% to 5% same-store NOI growth rate?

This is Scott. I guess, I'd just be speculating. My guess would be that over the next year or 2. We’re still getting some benefit and we would hope to have some stronger growth for a while, but again, that 4% to 5% long-term growth rate would be great for those assets.

Your next question comes from Daniel Bernstein with Stifel, Nicolaus. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: I had a question on the -- I guess, the senior housing portfolios, maybe...

Could you speak up, Dan? Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Sorry, I have a question on the senior housing portfolios, that you picked up in the fourth quarter and the first quarter. Do you have a sense of what the stabilized initial yields are since a lot of that is already in lease up?

Would you ask that question again? You cut out a couple of times, Dan. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Sorry. Do you have a sense of what the initial yield is on stabilized assets for the acquisition, your housing acquisitions, that you've done in the fourth quarter in mistral [ph]?

Senior housing triple-net acquisition yield, you're asking, Dan? Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: I'm going to pick up my phone here, sorry. I was asking -- a lot of the assets in -- the operating assets that you're picking up in the fourth quarter and then mistral [ph] here in the first quarter are on lease up. Do you have a sense of what the initial yield would be on stabilized assets in place today? If you were just isolating the stabilized properties, what would be the initial yield on those assets, do you think?

I guess that my rough answer would be they’d be slightly higher than the yields we reported because of that, but it obviously depends on the asset quality and the size of the portfolio and its growth potential. But I would guess, something in the 6.5% to 7% range for high-quality stuff. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then the other question I have is the MOB’s at 6.8%, it seems like -- I guess, it might be the asset quality itself that's driving that down, but are you seeing any cap rate compression in the MOBs and perhaps any -- is there any additional competition, given the low cost of capital for, I guess, both MOBs and maybe, senior housing.

Let me start and, John, I’ll throw it to you in just a minute, but there has been ongoing strong competition and probably a limited number of really high-end portfolios out there. So we think that cap rate -- this is a very appropriate cap rate for the quality of these 2 portfolios. John?

There's a lot of competition in the medical office space and a lot of kind of alternative capital and private equity chasing medical office space. So there has been cap rate compression, generally. We've been very disciplined on pricing, been particularly focused on the quality of assets as presented on the website today. And the assets that we picked up, as I mentioned before, the very high occupancy, located on great hospital system campuses, great hospital tenants, and as I said before, the in-place leases were kind of at the high end of increases and we're looking for -- to increase the NOI growth of those potential. So very appropriate pricing for these assets and we look forward to touring you through them in Dallas or in Atlanta when you have the opportunity. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Yes, absolutely. And I want to go back to George's comment from the beginning of the call about working with both the senior housing operators and the post-acute operators for changes in healthcare reform and change in the environment, and in particular, I was thinking about cannibal [ph] care organizations and the possibility of bundled payments and re-admission penalties to hospitals. So have you gotten together with your senior housing operators and your post-acute operators to actually come together with like -- maybe like a combined plan that you can go to the hospitals with and say, "Here's our re-admission rates, this is why you should give us the business going forward?" Have you actually gone down that path at all?

Yes, we have. And we've done a lot of work just with our assisted living, senior housing and post-acute operators here in our headquarters talking about that very topic, as well as best practices and other ways to develop win-win situations and maybe even joint buying and other things like that. But an example in, actually out East, Dan, is with a new hospital that we've done a lot of work with, health system, great health system, one of our assisted living operators is actually building right to the north of the hospital and one of our top post-acute operators is building right adjoining the hospital and there are ongoing discussions about how they can vet one another and to be prepared for ACOs, bundled payments, when they actually hit. Everybody’s trying real hard to figure out how to do it and how to do it effectively and we've been right in the middle of it and we're hoping that our concentration -- areas of concentration will continue to provide an opportunity for John Thomas and Chuck Herman and our people on both sides of the house and myself to foster more collaboration because frankly, even without stiff penalties being in place right now, there are some benefits for trying to deliver health care much more effectively and cost efficiently. So we've been very active in that area. And we're starting to see a lot of really good collaboration developing. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: One more quick question. I assume you’re splitting the CapEx on those Chartwell assets, equally with Chartwell and about -- what should I think about in terms of CapEx per unit for those facilities?

Yes, this is Scott Brinker. The 39 buildings that are on 50-50, everything is 50-50. There are no promoted interests or anything so we split all the cash flows equally and all the capital expenditures equally. In terms of the CapEx that will be needed over time, it helps that the buildings have been well maintained by the current owners and are relatively new. Best guess is $1,000 a unit plus/minus. We’ll have to assess that over time, but we think based on the age of the assets, these are probably at the low end of the spectrum range for CapEx.

Your next question comes from Todd Stender with Wells Fargo Securities.

Just to stay on that theme, probably a question for you, John Thomas. What's the CapEx you're looking for on the new medical office building portfolio?

Yes, a great question. We build it in to our underwriting and reserve, but again these are very new assets and the age of our portfolio is younger, much younger than our competitors and these are all fairly new assets. So kind of $0.50 a foot from time to time is an appropriate reserve.

Is that about where they were, the last couple of years?

Yes, yes.

Okay. And then any indication -- just what does the lease maturity schedule look like over the next 2 years, call it?

Yes, very, very low turnover. We've got about 6% of our portfolio rolling in '12, 5% to 6% next year and the next, we've really -- Mike Noto’s done a great job of spreading out renewals and getting longer-term leases in place for us. We have a very balanced portfolio and again, the downside of this and what we just acquired in the fourth quarter, those come in at about 94% occupancy. So very little roll in the next few years.

Okay. And probably a question for Scott Brinker. How much does occupancy factor into the price, this refers to the Chartwell deal. Would you go after a RIDEA deal if it, say, was in the 91%, 92% occupancy and if you had a cyclical high, how do you kind of think about that?

We would. It's just a matter of how it's priced. Benchmark portfolio that we bought a year ago was -- had occupancy in the low 90s. We've been able to increase that slightly and generate some very strong NOI growth. But the cap rate on that portfolio was a little bit lower than it would have been on a fill-up portfolio like you see with Merrill Gardens.

Okay. And just sticking with Chartwell. Do you guys have a purchase option to revert the Chartwell portfolio into a wholly-owned net-lease portfolio at the end of some pre-determined period?

Not necessarily. There's a buy-sell after 10 years, but otherwise, there's no right to acquire their interest or for them to acquire our interest.

And this is Stephanie. We look at this as a long-term partnership. As George spoke to you earlier, on our relationship strategy, we would like to grow in Canada alongside with Chartwell. That would be our long-term plan.

And I think, Todd, the other point I would make is that while we're going to have sort of a cap, at least for a while on how many RIDEA deals we do, to work on it, watch it and just make sure that they are working as well as we thought. And so far, they're great. The real strategy is to partner with the best operators. And many times, an operator has a strong preference for a RIDEA structure or a net-lease deal and we want to be with the best and the brightest and support them and grow with them. And as Scott says, of course, you have to worry about how you price it if perhaps there's higher occupancy and things like that. But again, I want to get back to basics and that is we want to be supporting the best health systems, the best senior housing and care operators in the country and some of them are going to be done through RIDEA and some through triple-net. And we think we have assembled just an outstanding group of operators and health systems.

Okay, that's helpful. And just a last piece here, just going back to dispositions. I think, George, you indicated, certainly, your slant towards the skilled nursing category and Medicaid. Any specific state concentrations, any states that you would start to migrate more so away from?

Not at the moment. Not at the moment. I think it’s more of a generic desire to have a higher private pay.

[Operator Instructions] Your next question comes from Rob Mains with Morgan Keegan. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: I don't have much left, just one. The comments on Genesis and some of the public companies, what they've been saying sort of suggests that the nursing home cuts haven't been as dire as we might have thought in the last couple of conference calls. Just how does that translate in any changes for your appetite for the asset class or the availability of investment opportunities?

It’s Scott Estes. I’ll take a shot at that one. I think you're correct, we have seen a little bit less than what was projected in terms of the aggregate potential impact of the Medicare rate increases and the therapy changes. Does it change what we're trying to do? Probably not because the bottom line is we're really focused on just a handful of key relationships in the skilled nursing post-acute area. Frankly, 5 to 7 operators in particular that we're likely to continue to grow with. And I guess, maybe, that could mean, with those operators, we may get more comfortable growing sooner than later, but I think most importantly, as George mentioned, we'll continue to probably creep up our aggregate private payments from the low 70s, now toward 80% over time. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: Okay. And then just one follow-up to Dan's question about the Chartwell CapEx. Would that all -- is that going to all come through on the CapEx line or is some of it going to be operating income? I'm just trying to think about how we should be modeling the FAD impact.

That CapEx does not come through, so that will come in -- we'll have to give you that information in the supplement, Rob, but in a 50-50 building, the only -- everything will come in on the net income line in terms of the interest in unconsolidated entities line. For the 3 buildings only, it will be consolidated in our RIDEA portfolio and you would see those facilities, but we'll help you guys do that. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: Right. So the 50-50, that will be a JV adjustment on the FAD?

Yes. Robert M. Mains - Morgan Keegan & Company, Inc., Research Division: Okay. And -- but the question, the thousand dollars number per unit, that Scott put out there, that would be a pure CapEx number? That's not 50-50 between operating expenses and CapEx?

Right, yes. It's a 100% CapEx number to be sure, yes.

Your next question comes from Tayo Okusanya with Jefferies. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Just a quick follow-up. In regards to the dispositions, could you give us a sense of timing around that?

Tayo, it's Scott Estes. I think probably, your best convention modeling is to assume middle of the year. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: Middle of the year? All right.

Yes. That's the best way to do it.

Your next question comes from Daniel Bernstein with Stifel, Nicolaus. Dan Bernstein - Stifel, Nicolaus & Co., Inc., Research Division: Sorry to keep you on the line, but one more question. The guidance for 2012, does it include the step-up already in the CCRC portfolio?

It does include our estimate for the entrance fee portfolio. I think it's net annually about 3% to 4% of the total. We did see an increase in both entrance fee and rental occupancy of 2% this quarter and based on where we're at, we were able to increase at least with our largest operator, the aggregate payments to us by about 4 point -- a little over 4% in 2012. That's included in that number.

At this time, there are no further questions. I will now turn the conference back to Mr. Chapman for closing remarks.

Thanks very much. I'd like to thank everybody for participating in the call. A very productive call for us and we're very, very pleased with what we've managed to achieve in terms of our investments and forming the relationships with new operators and new health systems and developers. So with that, I'd just remind you that we'll be available for any follow-up questions later. Thank you.

Thank you. This concludes the conference. You may now disconnect.